Daily Archives: July 7, 2010

… or coins from a truck. Two million euro coins have spilled on to a motorway in Southern Italy, thanks to an overturned lorry. Accident? Possibly. Or could it be the ECB reintroducing quantitative easing on the sly…?

Larry Meyer, a Federal Reserve governor from 1996 to 2002 and now at Macroeconomic Advisers, recently put out a great report summing up who the doves and the hawks are on the Fed’s open market committee.

One of the things that comes across is the informal rules that govern the committee’s voting behaviour (I’ve heard similar descriptions of these rules from other people as well). You might summarise them as:

(1) The Board of Governors shall vote with the Chairman (7 out of the 12 voting members).
(2) The President of the New York Fed shall also vote with the Chairman (another voting member).
(3) No more than two members shall dissent in any one vote (so two of the other four).
(4) Any regional Fed president who is not a monetary policy expert shall defer to the chairman. Read more

The European Central Bank will be back in the spotlight tomorrow (Thursday), when Jean-Claude Trichet, president, gives his regular post-council meeting press conference. But what will he have new to say?

The central bank’s main interest rate seems firmly stuck at 1 per cent, and the global economic outlook has changed little since June’s meeting (Germany doing better, China perhaps worse). There will be questions about European bank stress tests, but these are primary the responsibility of bank regulators (which don’t include the ECB). Greece’s rehabilitation efforts have been given an official thumbs up today.

The action recently has been on the ECB’s open market operations. The euro’s monetary guardian was pleased with its success last week in withdrawing, without upset, some €442bn in one year loans. With the amount of excess liquidity it has pumped into the financial system falling further this week, market interest rates have risen – in effect, tightening monetary policy.

That has prompted speculation Mr Trichet might announce further offers, perhaps for six month liquidity. But Read more

Are Bulgaria and Luxembourg unsung heroes of the global recession? Estonia has received wide praise for its fiscal position, and Poland’s economy is likewise admired for its refusal to contract. But this useful graphic from the Economist shows two additional players for the fiscal saints.

Public debt in Bulgaria and Luxembourg is between 0 and 19 per cent of GDP – a distinction shared only with Estonia. Both countries also share low deficits, as proportions of their GDP. But unlike Estonia, Bulgaria and Luxembourg enjoy below-average unemployment rates: 9.7 and 5.2 per cent respectively, compared to 19 per cent for Estonia. Read more

China has repeated its commitment to US debt (as though they’d do anything else when they’re long an estimated $2,450bn). But the data back them up. Figures show the drop in US holdings was among advanced economies; emerging economies increased their holdings, in aggregate, between Q409 and Q110. Indeed, emerging markets’ increase more than offset advanced countries’ decrease, leading to a small net increase overall. Data from IMF.

Old models of inflation work best, researchers in Australia have found: the Phillips curve came out on top in an RBA study of the three key single-equation inflation models. Expectation-adjusted mark-up models showed comparable results, but the New Keynesian Phillips curve did not fare so well.

Our results show that either the unemployment rate alone, or a combination of growth in unit labour costs and the output gap help to explain the deviation of inflation from measures of inflation expectations in Australia, once we have controlled for import price shocks. After controlling for the variables discussed above, we find little role for some other variables – notably commodity prices, excess money growth – that have sometimes been suggested as important determinants of inflation.

The paper also found that both the standard error and the explanatory power of these single-equation models have fallen since the introduction of inflation targeting in 1993. Read more

By Simon Roughneen in Bangkok. The Bank of Thailand’s new governor just can’t wait to get started. Long before he officially takes up the post on October 1, Prasarn Trairatvorakul launched into action today, surprising reporters with a statement that Thailand’s interest rate would jump to 2 per cent by the end of 2010.

An interest rate hike had been mooted, with current governor Tarisa Watanagase saying last month that interest rates are too low at the current 1.25 per cent. But she is unlikely to take offence at Prasarn’s dawn salvo. Rather, she will be pleased by the clear promise of continuity of monetary policy. A seamless handover is in prospect.

Prasarn, who steps down as head of Kasikorn Bank next week, said that with the board meeting next week (on July 14) he believed the key interest rate will increase in August, weeks before he is scheduled to take up his new post on October 1. Read more

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Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS

Claire Jones is the FT's Eurozone economy correspondent, based in Frankfurt. Prior to this, she was an economics reporter in London. Before joining the Financial Times, she was the editor of the Central Banking journal. Claire studied philosophy and economics at the London School of Economics. RSS

Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS

Sarah O’Connor is the FT’s economics correspondent in London. Before that, she was a Lex writer, covered the US economy from Washington and the Icelandic banking collapse from Reykjavik. Sarah studied Social and Political Sciences at Cambridge University and joined the FT in 2007. RSS

Ferdinando Giugliano is the FT's global economy news editor, based in London. Ferdinando holds a doctorate in economics from Oxford University, where he was also a lecturer, and has worked as a consultant for the Bank of Italy, the Economist Intelligence Unit and Oxera. He joined the FT in 2011 as a leader writer. RSS

Emily Cadman is an economics reporter at the FT, based in London. Prior to this, she worked as a data journalist and was head of interactive news at the Financial Times. She joined the FT in 2010, after working as a web editor at a variety of news organisations.
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Ralph Atkins, capital markets editor, has been writing for the Financial Times for more than 20 years following an economics degree from Cambridge. From 2004 to 2012, Ralph was Frankfurt bureau chief, watching the European Central Bank and eurozone economies. He has also worked in Bonn, Berlin, Jerusalem and Brussels. RSS

Ben McLannahan covers markets and economics for the FT from Tokyo, and before that he wrote Lex notes from London and Hong Kong. He studied English at Cambridge University and joined the FT in 2007, after stints at the Economist Group and Institutional Investor. RSS